0 the testing of the performance of economies and economic theories using mathematical methods
1 the part of economics that uses mathematics and statistics (= the study of the number of times something happens or is present) to understand financial and economic information:
In other words, our method remains econometrics, even though we end here with an increased awareness of the role of definitions.
Mathematical economics already had the deductive approach, and econometrics assumed that only statistical approximation was feasible, but we can do better if we can find definitions that fit stylized facts.
Since econometrics can only approximate reality, the true structural form can only be approximated.
Thus, many of the failures of econometrics are easily grasped as manifestations of structural changes combined with the inability to predict such changes.
Yet, it can be seen that the hypothesis of structural change provides an alternative, perhaps superior, explanation for many of the failures of econometrics.
However, over the last two decades the efficacy and scientific status of econometrics has become questionable.
His work has fundamentally changed the theory, econometrics, practice, and popular understanding of finance.
One should view the experimental method for what it is: a tool to understand economic phenomena that works alongside theory and econometrics.
